Question

Use the following information for Shafer Company to compute inventory turnover for year 2.

Year 2 Year 1
Net sales $647,500 $582,000
Cost of goods sold 389,500 360,840
Ending inventory 76,700 79,380
a. 9.98
b. 9.98
c. 5.08
d. 4.99
e. 8.30
f. 8.44

Answer 1

Inventory Turnover 2017 = 4.99 times

So option d is the correct answer.

Step-by-step explanation:

Inventory turnover ratio is an accounting ratio which is used to determine the number of times the average level of inventory is sold off and replaced in a particular period. The formula to calculate the inventory turnover times is,

Inventory Turnover = Cost of Goods Sold / Average Inventory

Where,

Average Inventory = (Opening Inventory + Closing Inventory) / 2

Average Inventory 2017 = (79380 + 76700) / 2

Average Inventory 2017 = $78040

Inventory Turnover 2017 = 389500 / 78040

Inventory Turnover 2017 = 4.99 times